US-India Economic Ties: To the Next Level and Beyond

© Photo by Aquaview, Flickr, CC BY-NC-SA 2.0

Published October 8, 2024

Executive Summary

This summary outlines the key recommendations for policymakers that emerged from deliberations at the Takshashila Institution–Hudson Institute roundtable series “US-India Economic Ties: To the Next Level and Beyond.” Its recommendations are divided into four proposed areas for collaboration between India and the United States: trade and investment, ideas and human capital, technology, and methods and mechanisms.

Trade and Investment

Strengthening trade and investment ties between India and the United States requires a multifaceted approach. India has recently deployed schemes known as production-linked incentives (PLIs) to attract companies to set up manufacturing facilities in priority or strategic sectors—including electronics, pharmaceuticals, textiles, and white goods. Despite measures like PLIs, India’s manufacturing growth has remained relatively stagnant. India would benefit on a much broader scale by limiting PLIs and instead focusing on simplifying import and export processes and reducing import duties and tariffs to create a more open trade environment. The government’s recent announcement that it is simplifying processes through a single window system, for example, will benefit not only large firms but also small firms that aspire to list on global platforms. India can also experiment with land acquisition and labour market reforms in select states before rolling them out countrywide. Additionally, New Delhi should invest more in critical infrastructure, such as freight rail and deep-water ports, to support economic expansion. To further attract investment and boost exports, at a time when there is a favourable geopolitical situation, the country would benefit from a regulatory system that is more predictable, transparent, and easier to navigate. Fostering state level relationships and focusing on co-development could further enhance collaboration. For its part, the US should work to restore the effectiveness of the World Trade Organization (WTO) and avoid weaponizing international trade. Making globalization work more effectively is key to promoting interconnectivity and resilience.

Ideas and Human Capital

To attract top global talent and high-performing companies, India would benefit by making its cities more appealing and livable. This effort requires the active participation of states and municipalities. Leveraging cooperation between sub-national governments can further support this goal, as India’s state governments play a crucial role in attracting investment through the issuing of permits. Strengthening partnerships between American and Indian academic institutions is also critical. Instead of focusing solely on recruiting American universities to build campuses in India, New Delhi should explore symbiotic options like reciprocal study programs. India also needs to enhance the capacity and improve the quality of its higher education institutions. Creating a more open environment for research and collaboration requires not only easier access to funding but also a reduction of unnecessary bureaucratic hurdles. This, in turn, would facilitate intellectual collaboration. Both India and the US should streamline visa processes, making it easier for academics and thought leaders to collaborate. Additionally, the two nations’ leaders should foster personal connections among corporate leaders. To attract the best talent, India needs policies that welcome foreign professionals.

Technology

To leverage the potential of collaboration in the technology industry, India and the United States should resolve disagreements over tariffs, regulatory barriers, and intellectual property rights. New Delhi and Washington need to prioritize cooperation in emerging technologies, such as artificial intelligence (AI) and synthetic biology, and make efforts to update regulatory frameworks to match the evolving tech landscape. Effective partnerships across academia, the private sector, and government should also be established. A coherent approach to US-China tech competition, moreover, would provide the private sector with clear guidelines aligned with both Indian and American national security interests. India would benefit by shifting its regulatory environment to be more export-friendly and internationally competitive. Increased support for and investment in the biotech sector, including advanced purchase agreements and more robust intellectual property (IP) protection, would enhance growth and collaboration in this crucial field.

Methods and Mechanisms

The world’s oldest democracy and the world’s largest democracy share both values and interests. Both countries are multicultural, multiethnic, secular, pluralistic, and open societies. They also have a similar vision for the global security architecture, including a stake in pushing back against China’s military and economic expansionism.

Washington and New Delhi also need to address differences through established channels, such as preexisting bilateral frameworks and strategic dialogues, with an understanding that differences, while inevitable, need not derail the working relationship. Sensitive issues are best managed discretely away from media attention. Informal, non-governmental diplomacy, such as CEO dialogues, can foster better understanding. India, for its part, should give its diplomatic agencies more leeway to conduct outreach. To this end, linking geostrategic and geopolitical objectives, offering political support for energy collaboration, and integrating trade into strategic dialogues can enhance cooperation. Establishing academic programs, collaborations with think tanks, and cultural exchanges can also promote deeper mutual understanding between the two nations, and make it easier for researchers, academics, and students to travel from country to country. Aligning norms and regulations can prevent conflicts over the transfer of sensitive technology and intellectual property. Prioritizing economic and strategic ties while expanding educational exchange programs would help create a stronger relationship. Finally, improving cooperation at the United Nations and in other multilateral forums would enhance both countries’ ability to shape the international order.

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